Markets are cautiously awaiting the Non-Farm Payrolls report today
The Dollar eased off 2018 highs against its main rivals in choppy trade ahead of US April Payrolls data. Geopolitical risk issues resurfaced as trade talks between China and the US heated up with China promising not to back off. The yield on the US Ten Year Treasury slipped 2 basis points to 2.95% (2.97% yesterday).
Outlook: Overnight markets saw volatile trading after the release of the FOMC statement. Interpretations to the Fed’s “symmetric” reference to inflation were mixed. Economic data releases saw Core Eurozone CPI and UK Services PMI miss forecast. Upbeat Australian trade numbers which beat expectations lifted the Aussie. Initial US Jobless Claims bettered forecasts although Preliminary US Q1 Labour Costs fell more than expected.
Trading View: The US Ten Year yield slipped further away from 3.0% which gave the Dollar’s Rivals a breather from its robust short-squeeze. The Yen outperformed as geopolitical risk issues re-surfaced. Trades will keep a wary eye out for China and Iran. Politics may come back to haunt the Dollar.
But today it’s Friday Payrolls Day (GMT 12.30 pm, May 4/Local Time 10.30 pm, May 4) US April Payrolls are expected to expand between 180,000 to 200,000 (median 192,000.) following March’s 103,000. The Unemployment Rate is forecast to improve to 4% from 4.1%. Wages (Average Hourly Earnings) are forecast to ease to 0.2% from 0.3%.
A Payrolls increase of less than 180,000 should see further Dollar losses.
Wages are also crucial to the overall inflation outlook. A fall over expectations will be negative for the Greenback.
The Dollar Index (USD/DXY) – eased off its highs mainly on the Euro’s bounce. USD/DXY ended down 0.28 % to 92.446 (92.773 yesterday). Immediate resistance lies at 92.80/90 (overnight high traded 92.76). Immediate support can be found at 92.30 (overnight low 92.345). Expect further choppy trade in a 92.30/80 range today.
EUR/USD –The Euro railed in despite a miss on Euro Zone inflation numbers. The overall weaker Greenback buoyed the Euro which bounced off strong support at 1.1940. EUR/USD rallied to a high of 1.20088 before easing to 1.1989 at the NY close. Immediate support and strong support lies at that 1.1940/50 area. Immediate resistance can be found at 1.2010 and then 1.2030. The 1.2030 was high on Thursday and if that is broken decisively we could see further Euro rebound. The strong support should hold at the 1.1940 which if broken could yield 1.1870 and 1.1820. It’s a trade the range shag day on all currencies prior to the Payrolls number. Likely range 1.1950-1.2050.
GBP/USD – Sterling closed flat, unable to gain from the Dollar’s fall after UK Services PMI missed forecasts. Delays to Brexit negotiations have weighed on the British Pound which was trading above 1.4300 in mid-April. Prime Minister Theresa May is under intense pressure from rival factions over her divided Conservative Party following a Cabinet split earlier this week. This could see the Brexit transition period extended for a few years. In the currency markets, uncertainty breeds contempt. And for Sterling, when it rains, it pours. GBP/USD closed flat at 1.3570 (1.3569 yesterday). Sterling traded to an overnight low of 1.3538. Immediate and strong support lies at 1.3530/40. A sustained break of 1.3530 should see 1.3470. Immediate resistance lies at 1.3600 and 1.3630. While the Pound feels heavy, often it’s like the Aussie, ie most offered near its lows and vice versa. Today it’s all about the US Dollar and Payrolls. Likely range 1.3540-1.36450. JTTRS (Just Trade the Range Shag).
USD/JPY – In a relatively quiet trade with Japan on holiday yesterday, USD/JPY drifted lower to 109.17 at the close (109.92 yesterday). The lower yield on the US Ten Year treasury to 2.95% (2.97% yesterday) pushed the Dollar down. The progress (or lack of) in trade negotiations between China and the US will be the focus in Asia for the first part of the day. Any heightening of risk factors will favour the Yen. USD/JPY has immediate support at 109.00 and then 108.80. The overnight low was at 108.929. Strong support lies at 108.60 which should hold until Payrolls. Immediate resistance can be found at 109.60 and 109.90/00, with 110 a formidable barrier. Look to trade between 108.80-109.80
AUD/USD – The Australian Dollar rallied 0.60% on much better-than-forecast Trade Surplus and April Building Approvals. The Aussie closed at 0.7532 (0.7490 yesterday). AUD/USD survived strong attempts to crash through that 0.7470/80 support level which is formidable. Immediate support for AUD/USD lies at 0.7500 and then 0.7480. Immediate resistance can be found at 0.7550/60. If the topside level of 0.7560 breaks, we could see the Aussie back to 0.7620. At the end of the day, the Aussie remains hostage to the US Dollar. Likely range today 0.7485-0.7545.
Economic Data Releases today (apart from the US Payrolls): RBA Monetary Policy Statement, China Caixin Services PMI data, Euro Zone Market Services and Composite PMI data
FOMC Members Dudley, Williams, Quarles and Bostic – all have speeches following the US Payrolls release.
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